JAKARTA (TheInsiderStories) – United States Trade Representative (USTR) has announced is beginning investigations into digital services taxes that have been adopted or being considered by a number of trading partners like Indonesia, European Union (EU), Britain, Italy and Brazil, which could lead to new punitive tariffs by Washington and exacerbate global trade tensions. It said, the investigations will be conducted under Section 301 of the 1974 Trade Act.
“President (Donald) Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies. We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination,” said secretary of trade, Robert Lighthizer, in an official statement released on Tuesday (06/02).
He highlighted Trump’ administration’ growing anxiety that the largest US technology companies could face higher tax bills abroad as governments seek to boost revenues in the midst of the COVID-19 pandemic. Last year, the USTR has completed and concluded the first segment of its investigation for France’ digital services tax (DST) discriminates against American companies
Specifically, USTR’ investigation found that the French DST discriminates against US digital companies, such as Apple, Google (GOOGL.O), Amazon (AMZN.O) and Facebook (FB.O). In addition, the French DST is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing particular American technology companies.
“USTR’ decision sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” said Lighthizer.
He continued, “Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies.”
The notice solicits comments from the public on USTR’ proposed action, which includes additional duties of up to 100 percent on certain French products. Its also seeks comment on the option of imposing fees or restrictions on French services.
The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of US$2.4 billion. The value of any US action through either duties or fees may take into account the level of harm to the American economy resulting from the DST.
In the last meeting of Group 20, the members failure to implements a global taxation system for the digital era starting 2020. At last year meeting at Osaka, Japan, the ministers and central bankers agreed to collect tax from the tech companies.
“There is a consensus to build a solution by the end of 2020. Lets be clear – either we have at the end of 2020 an international solution… clearly in the interest of all countries and digital companies, or there is no solution and … then it will be up the national taxes to enter into force,” France finance minister, Bruno Le Maire told reporters at the sidelines of the meeting in Riyadh, Saudi Arabia, on Feb. 24, 2020.
Followed the decisions, the leaders encouraged further work by the Organization for Economic Cooperation and Development (OECD) on the global rules to tax digital giants tech firm. The OECD wants to agree on technical details of such a tax by July.
US treasury secretary, Steven Mnuchin commented, the issue was being addressed in negotiations with the OECD, and he hoped it could be resolved by the end of the year. But, he noted, Washington would strike back at the digital taxes passed by France and others if those efforts failed.
“We’ve been very consistent in saying we think the digital services tax is discriminatory in nature against digital companies, and specifically a handful of US companies,” he said.
France and the US have declared a truce to allow the multilateral talks to reach a conclusion by year-end. Mnuchin claimed, his country would respond with investigations and potential retaliatory tariffs if countries decided to go it alone, outside the OECD deal.
According to Le Maire, the countries to address the issue of digital companies making profits in many countries without any physical presence, which means without paying the due level of taxes. While, Saudi finance minister, Mohammed Al-Jadaan, stated this year would represent a key test for tax transparency worldwide.
“Today, members of the G20 and OECD work together to implement the internationally agreed standards on tax transparency. These standards balance the need to access information for tax purposes and the need to protect taxpayers’ confidentiality,” said Al-Jadaan.
More than 6,100 bilateral exchange agreements had been signed and that tax-authorities worldwide were now collecting tax revenues utilizing the automatic exchange of information mechanism, said the minister.
“Information on 50 million financial accounts was exchanged by the end of 2019 for a total value of about 5 trillion Euros (US$5.43 trillion), and almost 100 billion Euros in additional tax revenues have been identified,” noted by Al-Jadaan.
A final agreement on the global rules is to be ready by the end of this year to avoid a proliferation of different digital tax regimes all over the world, he continues.
While, Indonesia’ finance minister, Sri Mulyani Indrawati stressed that Indonesia provided support to the OECD to immediately complete the formulation of digital economic taxation. She hopes that this institution develops an international taxation architecture by creating a fair, simple, transparent and pro-tax system in favor of developing countries.
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